Buy Saatvik Green Energy Ltd For Target Rs.470 by Motilal Oswal Financial Services Ltd
Margin improvement hinges on cell ramp-up
* Saatvik Green Energy (SGEL) reported a revenue of INR9b, 15% above our estimate, as module sales were 640MW (10% above our est. of 580MW). EBITDA came in 5% below our est. at INR443m due to a lower EBITDA margin of 4.9% vs our est. of 6%. APAT was 2x our est. at INR232m driven by substantially high other income (INR253m, +190% QoQ).
* Key things we liked:
1) the 2.4GW cell manufacturing capacity is scheduled for ALMM-II inspection in Sep’26, with production expected to commence in Dec’26 and full ramp-up by 4QFY27
2) a strong order book of 6.7GW (INR88b), comprising 60% DCR and 40% non-DCR orders
3) management maintaining FY27 revenue guidance of INR60b and EBITDA margin guidance of 12%.
* Key monitorables:
1) ramp-up of the new 2.4GW cell manufacturing capacity and timely commissioning of the 3.6GW cell facility
2) improvement in EBITDA margins as cell capacity ramps up
3) revenue and EBITDA contribution from non-solar businesses, which management aims to increase to 15% of revenue by FY28 (currently 4–5%)
4) new order momentum and pricing across both DCR and non-DCR segments.
Highlights of the 2QFY27 performance
* The Utility/C&I segments contributed ~55%/28% of 2Q revenue, while Retail contributed 12% and other businesses 4%, with the latter targeted to reach 15% of revenue over the next two years.
* Odisha Phase I operationalized 1.3GW of module capacity on 2nd Nov’26, with the remaining 2.7GW on track for commissioning in Dec’26 to reach a total module capacity of 8.8GW.
* The 2.4GW cell line at Odisha commenced trial runs, with ALMM List II inspection scheduled in Nov’26 and production ramp-up targeted by Dec’26.
* The FY27 annual guidance remained unchanged at ~INR60b revenue and 12% EBITDA margin, implying significant margin acceleration in H2FY27.
* The confirmed order book stood at 6.68GW (60% DCR / 40% non-DCR), bolstered by major wins from SECI (INR10.4b) and Vikram Engineering (INR4.7b).
* The next phases of backward integration are mapped out, with Phase 2 (3.6GW cell capacity, taking total capacity to 6GW) having broken ground, with commissioning targeted for FY28, and Phase 3 (6GW ingots/wafers) planned for FY29.
* Average realization was INR13.49/Wp in 2QFY27 and INR13.89/Wp in 1HFY27.
* Valuation:
We value SGEL at 8x FY28E EBITDA and, adjusting for net debt, we derive a TP of INR470, implying an upside of 31%.
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